The diagrams below provide an overview of the results of the analysis, in particular a comparison of each variable against examples in the literature and the relationships between the variable observed in this research and in academic literature reviewed;
130 Figure 7.33: Relationships between the variables – comparison of those in the literature and those observed in this research
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There are a number of methods available in academic literature and industry publications to estimate the available capacity of container terminals. This research adopted the approach that was used by Tioga (2006) in their large study of U.S port. This allowed the research results to be compared to a number of U.S ports, both large and small. The research used calculated the wharf and crane capacity of each of the New Zealand ports based on observed and reported crane productivity rates, terminal land areas and terminal operating equipment.
Port capacity in New Zealand is between 4.5 million and 7.25 million TEU32 depending upon the
measurement used and timeframe of analysis (i.e. a short term peak period or a longer term sustainable capacity). Land capacity is significantly lower than crane capacity for all ports, reflecting New Zealand’s legacy issues associated with ports that have been constructed in locations where cities have formed around them and it is now difficult and costly to reverse the problem.
For all ports the utilisation rate for yard is higher than that of the crane utilisation, reflecting a relative shortage of land in most cases. Utilisation is high across most New Zealand ports, with the average across crane and yard utilisation being 48% for all New Zealand ports. This is typically higher than the results of U.S ports reported by Tioga (2006) but less than the European examples outlined. Tauranga and Lyttelton, both of which are forecast to be the main ports post port rationalisation (New Zealand Shipping Federation (2010)), have yard utilisation figures greater than 70%. . Academic research (in particular Haralambides (2012)) suggests once 70% port capacity utilization has been reached congestion and productivity difficulties starts to set in.
Therefore, New Zealand ports as well as international ports are struggling with the same problem of maintaining and growing capacity in the face of rapidly increasing throughput demand while maintaining productivity levels to shipping lines.
Productivity, in the port sense, is typically referred to the productive ability to load and unload container ships, which is a result of the efficiency of the entire container terminal operating system and staff. Maintaining productivity levels in loading/unloading container vessels is of the highest importance to ports as their main clients are the shipping lines, whose vessels are being loaded or unloaded.
32
Refer to Table 5.8and Table 4.7 for further details on the information used to calculate these
figures.
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The productivity of New Zealand container ports was analysed in this research using the crane rate, vessel rate and ship rate productivity measures which concentrate on how many containers are moved between ship and wharf by an individual crane or collection of cranes for each crane or labour hour. This was more restrictive than some academic and industry international examples which also analyse TEU per hectare, TEU per berth and/or vessel turn times. In the New Zealand case the data is not available to carry out a wider ranging analysis of container terminal productivity.
On average, the productivity of New Zealand ports is high in relation to the ports examined and outlined in international literature. In this sense, the fact that New Zealand ports compete so hard just to survive and have smaller intertwined hinterlands may actually be beneficial, but proof of thus is outside the parameters of this study.
Over the majority of the time period Port Tauranga had the highest crane, ship and vessel productivity rates across New Zealand container ports. Much has been made of the Port of Tauranga’s non- unionised labour force (all other New Zealand ports employ union controlled staff), economies of scale (vessel exchanges are typically higher than other New Zealand ports), high crane technology and good road and rail land transport connections33. Whether it is one or a combination of these factors
that results in the high throughput growth and high productivity levels is unknown and an investigation is outside the scope of this research.
From the analysis performed it can also be said that South Island ports are generally less productive compared to the New Zealand average across the three productivity measures reported. This is especially the case if Napier was to be excluded from the crane rate calculation due to their differences in infrastructure34. This poses the question of whether New Zealand importers and
exporters should be looking to hub or tranship products through large North Island ports like Tauranga in order to gain productivity improvements.
The Port of Tauranga has the aspiration of being New Zealand’s single hub port and has purchased a half stake in PrimePort Timaru to allow the opportunity to marshal South Island cargo to be transhipped over Port of Tauranga. The Timaru location has latent capacity and has the potential to again attract throughput volumes from large exporters in close proximity which currently export out of
33
This comment has been based of discussions with Managers in other New Zealand Container
Ports.
34
Port of Napier uses Harbour Mobile Cranes which are typically less productive than the Gantry
Cranes uses by all other New Zealand ports featured in this research.
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Lyttelton Port. While this research suggests that productivity benefits are likely if growth in throughput volumes were to be transhipped through North Island ports rather than be directly exported via Port of Lyttelton or Port Otago, further investigation, outside this research, needs to be completed to determine the full costs and benefits. The only problem with the suggestion that further throughput volumes should be diverted to Tauranga is that since quarter one 2009 individual crane productivity has been in decline at Tauranga, particularly in quarter one 2012 as strike action occur in Auckland and large amounts of volume shifted quickly towards the Port of Tauranga. There has also been a general increase in the portion of non-productive time.
Ports of Auckland’s crane, vessel and ship productivity has been increasing over the time period studied and sharply rose after the loss of volume to other North Island ports. The case for Wellington is similar to that of Tauranga’s – strike action meant immediate productivity took a hit – however Wellington has bounced back in a faster manner.
The analysis performed and the commentary above indicates a negative relationship between volume or capacity utilisation and productivity. That is, if volume or capacity utilisation increases productivity will decrease. This is similar to the conclusions of academic literature which suggests that container terminal managers must balance the need to provide capacity at the terminal to allow for volume increases with keeping the productivity of the terminal high to attract new or grow existing shipping customers (Merchx (2013)).
However the case of CentrePort Wellington was different in this research. While it did experience a decrease in the productivity when it was required to respond quickly during the period of strike action at the Ports of Auckland, generally and over the totality of the time period there is a positive relationship between volume and productivity – when volume increases so does productivity – the opposite of what was expected from the study of the theoretical basis and the previous academic research. These differences and similarities to the academic literature are diagrammatically outlined below
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Figure 7.34: Diagrammatic Overview of the Relationship between Volume or Utilisation and Productivity
The question this then poses is, as CentrePort Wellington has a positive relationship between volume and productivity, why then does not the New Zealand industry/government direct volume through the Wellington port, or undertake initiatives which seek to grow trade through the Wellington port? Given the relationships outlined above, if volume was diverted from other New Zealand ports to Wellington, the New Zealand port industry overall would be more productive. This may also provide an opportunity to increase the resilience of New Zealand’s supply chain and port industries. This is a contrasting view to the industry’s current view of either a single New Zealand hub port or a rationalised port structure with one major port in each of the North and South Islands, of which Wellington is not the recommended port for the North Island.
One reason this is not occurring may be due to the inland origin and destination of containerised freight. As part of this research a review of each of the major New Zealand trade industries was undertaken and concluded that there is a relatively low concentration of import and export industries located in the Wellington region. Therefore the inland transport leg to get cargo to and from the Wellington port is low and costly. However, this does not mean that the theory of pushing cargo towards Wellington to generate industry productivity increases should not be investigated. Although when the initiatives which seek to grow trade through the Wellington port and increase New Zealand productivity are evaluated, they must be evaluated alongside other initiatives to increase port productivity such as new crane or terminal equipment in other large container terminals, which may be more economical than diverting trade towards CentrePort Wellington.
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The analysis shows that the capacity utilisation of CentrePort Wellington is low across the both the land and crane assets. While there is currently a positive relationship between volume and capacity, it could be expected that when capacity utilisation increases above 70% the nature of the relationship could change and even turn negative. This is another reason for not diverting trade towards CentrePort Wellington. Therefore, perhaps Tauranga and Auckland are at the more developed end in terms of terminal infrastructure and that is the reason why they have negative relationships between volume/capacity and productivity.
The comparison of terminal infrastructure and productivity between Wellington and Napier ports shows that CentrePort Wellington has developed infrastructure that is comparable to a large international terminal while Napier uses less advanced infrastructure in the harbour mobile cranes, however their productivity levels are of a similar level. Wellington and Napier ports have similar volumes, are located close to each other, but have different infrastructure in place. There is a concentration in Wellington on a single crane port quayside crane which has resulted in a high crane rate and low vessel rates. Napier on the other hand, has low crane productivity from each of its harbour mobile cranes but high vessel and ship productivity rates are comparable due to the concentration on a higher number of cranes (i.e. higher crane intensity) as well as innovative methods of handling empty containers. In terms of the commercial impact – Napier is likely to have incurred less capital cost impact and running costs however their labour costs are likely to be higher due to the requirement to run further labour gangs for each crane in comparison to Wellington.
Wellington is no less developed than the Auckland or Tauranga ports, it is just at another point in its asset utilization compared to the larger New Zealand ports. This then suggests that, in New Zealand, the relationship between productivity and volume or capacity utilization changes dependent upon the level of utilization.
The analysis has shown the benefit of investment in infrastructure. Port infrastructure is expensive and has long payback periods, however there are significant benefits from increasing investment in container terminal infrastructure. In 2006 Lyttelton Port of Christchurch invested in a new quay crane. Since the introduction of this crane, crane breakdowns have dramatically decreased. In terms of productivity, the crane installation completion resulted in a step change increase in the vessel productivity but only smaller increases in crane and ship productivity rates. This is to be expected as crane and ship productivity rates exclude any non-productive elements in the calculation of
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productivity – therefore crane breakdowns never entered into calculations. However, the fact that there have still been increases in crane and ship productivity indicates that there have been benefits received outside of just the reduced breakdowns – i.e. the container terminal is generally more productive as a result of increased reliability.
7.3
INLAND PORTS
As discussed throughout the research the New Zealand ports studied have a shortage in available terminal land areas. There have been investment inland terminal facilities by New Zealand ports to provide increased storage area at a cost less than expensive land reclamation. However, some ports have also invested in inland terminal facilities as a means of entering a competitor’s hinterland area and growing market share.
The research showed that infrastructure upgrades in inland hubs had a positive benefit for the productivity of Tauranga and Otago ports but a detrimental impact on the Ports of Auckland. In the detailed analysis of the relationship between inland hubs and their integrated shipside terminals, it was shown for the Lyttelton Port of Christchurch that there was a positive relationship between the throughput of the inland hub and the productivity of the shipside container terminal. An increase in inland hub volume not only increases productivity, but it also reduces the time delays/stoppages at the port. This is consistent with the theoretical underpinnings and previous academic literature. These relationships are outlined diagrammatically below.
Figure 7.35: Diagrammatic Overview of the Relationship between Inland Hub Use and Container Terminal Performance
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Therefore the inland hubs are being used as both a means of increasing operational effectiveness by increasing land area, decreasing infrastructure utilisation of wharfside equipment and increasing productivity as well as a means of competing against other New Zealand ports.
The relationships covered in this, and other international research such as Tioga Group (2010), are occurring over a number of years and therefore have suitable time to adjust. As an example, the productive ability of the Lyttelton Port has increased over time. However, this does not mean that Lyttelton could handle sharp increases in volume while maintaining productivity. The impact of strike action provide a good case study for determining what would happen if New Zealand ports needed to quickly respond so sudden changes in volume.
Strike action by the labour force in Auckland at the end of 2012 provides a perfect test of the relationship between productivity, capacity and volume as it illustrated a quick shift in volume – immediately large amounts of freight diverted Auckland for other North Island ports. Large volume increases at the Port of Tauranga resulted in falls in crane productivity and vessel and ship productivity.
Finally, while this research provides important analysis and insights into relationships between volume, capacity and productivity, it is important to note that there are also other factors involved in maximising the performance of a container port. Something that is missing from the quantitatively based research is the health and safety risk involved in operational container ports. Container ports typically involve a high health and safety risk relative to other industries or workplaces. Container terminal managers must insure that their desire to increase throughput volume and productivity does not unnecessarily place workers in further danger.
An example of this is at the Lyttelton Port of Christchurch. Throughout the 2013 year the port released press statements on this increased throughput growth, high productivity and increasing revenues. The 2013 Annual Financial Report35 highlighted the high growth rate and record container throughput.
However in the 10 month period to September 2014 three fatalities and multiple accidents have occurred within the Lyttelton Port operational area, in a time when trucking customers suggested on numerous occasions that landside congestion was placing increased risks –The Press newspaper reported that “Other drivers, who no longer work at the port, have told The Press of a "below average"
35
http://lpc.co.nz/TempFiles/TempDocuments/Annual%20Reports/LPC-Annual-Report-
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truck fleet, congested facilities and an environment where workers' health and safety concerns are not taken seriously enough”36.